A personal power in a trust is a special kind of power given to someone the settlor really trusts. It’s different from making someone a trustee because it shows even more confidence in the person chosen. With a personal power, the person has the final say on certain decisions about the trust, and no one else can override their choice, not even a court. This power is all about the person who has it, and they don’t have to act reasonably like a trustee would have to. It’s like giving them total control over those specific decisions. In Florida, there is some disagreement about whether personal powers held by a trustee are considered fiduciary powers or not. However, regardless of this, the trustee is still required to follow certain duties under the Florida Trust Code. To create a personal power, the settlor must clearly express their intention to do so in the trust document. If it’s not clear, a court will try to figure out what the settlor intended. Once a personal power is established, Florida courts have the authority to determine if a trustee actually possesses a personal power. However, the court’s jurisdiction over personal powers may have some limits, and there are certain acts in which a court would always retain jurisdiction. When a court is dealing with a trust, there are limits to what it can control. The court can’t tell the trustee what to do when it comes to making decisions about a personal power. This means that if the trustee has been given the power to make certain decisions on their own, the court won’t interfere unless the trustee has clearly done something wrong. This is because the person who created the trust (the settlor) wanted the trustee to make those decisions without anyone else getting involved. So, if the trust says that the trustee has a personal power, the court can’t interfere with that. The court in the French v. Northern Trust Co. case said that when a power is given to someone based on personal trust, a court shouldn’t interfere. In the South End Bank & Trust Company v. Hurwitz case, the court said that if there’s no clear guidance for the trustee on how to use the power, then a court can’t judge if the trustee made the right decision. This means that if a power is personal to the trustee, then only they should make decisions, and the court shouldn’t question them. When someone gives a personal power to someone else, they are trusting that person to make decisions in a way that the giver would have wanted. But it’s important to remember that personal judgment is subjective, and different people may have different opinions on what’s right or wrong. However, there are some things that would never be tolerated by a court, like taking a bribe. In those cases, the court can cancel the power and even remove the person who was given the power. It’s important for a person with a personal power to always be honest and act in a way that is fair and just. In Florida, a court can step in if a trustee is not using the trust money for the right reasons. For example, if a trust was set up for education and the trustee spends the money on something else, the court can undo that decision. Trustee has to treat all beneficiaries fairly unless the trust says otherwise. If the trust says the trustee doesn’t have to be fair, then that’s what the trustee has to do. The first trust provision won’t have any negative tax consequences, because the trustee (the surviving spouse) can only give herself a reasonable amount of money for her health and support.
But the second provision could have tax consequences, because it gives the trustee (the surviving spouse) complete control over how much money she can give herself. This could be considered a “personal power” and might be subject to estate or gift taxes. Can the trustee give themselves more money than they need for health and support? If the trustee can use their personal judgment to decide what is “desirable” for their support, they might be able to give themselves more money. The trustee’s actions would not be challenged, as long as they are not for a different purpose than what the trust was created for. The new Florida Trust Code does not solve this problem because the duty to act in good faith does not create a standard where there would be none. A Florida statute prevents trustees from making tax-sensitive decisions, but there is an exception for discretionary distributions for the trustee’s health and support. So, the trustee might be able to give themselves more money and there could be tax consequences. If someone creates a trust and wants to give someone the power to make important decisions, like selling trust property or ending the trust, they should only choose someone who doesn’t benefit from those decisions and is trustworthy. This is important to avoid potential tax issues and conflicts of interest. The settlor can give the trustee the power to use the trust money for the beneficiary’s best interests, without having to worry about what’s left for other people. This means the trustee can decide what’s best for the beneficiary without being questioned. It gives the trustee more flexibility to help the beneficiary, but also protects the interests of other people who might get the money later on. If the creator of a trust wants to give someone complete and unquestionable authority over a certain aspect of the trust, they can use something called a “personal power.” This means that the person in charge of the trust can make decisions without being questioned by a court. It can be a way to prevent unnecessary demands and potential legal battles from beneficiaries who might not be happy with the decisions made by the trustee. If the settlor wants to give the trustee the most authority possible, a personal power might be the best choice.
Source: https://www.floridabar.org/the-florida-bar-journal/should-you-incorportate-a-personal-power-into-your-clients-trust/
Leave a Reply